The great counter-factual scenario: What if proponents of an Internet-centric strategy had won the day and what if the courts had not overturned a judge's order to break up Microsoft?
That includes Steve Ballmer, who presides today over what's likely to be his last financial analyst gathering as Microsoft's CEO. Sometime within the coming year, Ballmer plans to step down, leaving the scorekeepers to size up his legacy and he would bristle if anyone applied that description to him. But in his quiet moments -- if those exist -- Ballmer knows that there's going to be an asterisk left on his record because after all these years, Microsoft still gets most of its revenues from Windows and Office licenses. And with the notable exception of Xbox, it's simply had miserable luck in the consumer market.Armchair critics have loudly dismissed the Ballmer years. He's been the CEO and so they say he deserves the blame. That's true. But I'd argue for a Gentleman's "C" rather than an "F" when you consider that Microsoft's strategy for success in the 20th century has kept it from similarly dominating the 21st century tech scene. In the mid-1990s, some senior executives, like Brad Silverberg, and his lieutenant, Ben Slivka, argued for a strategy where Microsoft would create the best open platform for Internet computing. But Ballmer and Microsoft co-founder Bill Gates were swayed by so-called "hawks" who opposed demoting Windows in favor of a more Internet-centric approach and kept the protection of the Windows monopoly as Microsoft's top focus. With the benefit of 20/20 hindsight, we now know who was right. Unfortunately for Ballmer, this one decision, more than any other, preordained his tenure as CEO.
Windows was untouchable and even with a company blessed with so many smart people and so much money, Ballmer was hemmed in by what was possible. So, for instance, when the tech industry underwent sharp changes in the last decade, Microsoft talked a good game but reacted too slowly to meet the rise of Google and the importance of search-based advertising. Same for the company's smartphone and tablet-based software, which never came close to matching Apple or Android's share of the market. Windows took precedence and the rest was secondary.
Curveball, courtesy of the court
History has a way of offering once-in-a-lifetime opportunities and one came Microsoft's way in June 2000. That's when a U.S. district judge with a penchant for nodding off during trial, delivered a whopper of a ruling. After a months-long antitrust case brought by the government, U.S. District Judge Thomas Penfield Jackson decided to split up Microsoft. One company would make PC operating systems, the other would operate the rest of the business.
The breakup was a penalty for bad behavior. But looking back more than a decade later, Jackson's decision appears prescient. If employees are trained for 30 years (many, for their entire careers) in these things, it's really difficult to just "forget" and "re-learn." Even with great leadership, a new entrant with nothing to "unlearn" has advantages in speed, agility, innovation, and market responsiveness.
Even before Ballmer announced his intention to retire, there were calls to break up the company into different pieces. What if this had taken place at the start of the millennium? A Windows, Server and Tools and Office company would have flourished selling product to an entrenched, large, and profitable market. The other company might have been better suited to catch the next technology wave, turning into the sort of nimble, spunky competitor that Microsoft was back in the 1980s, when it bested the likes of Lotus, Ashton-Tate, Borland and WordPerfect.
"Honestly, they've had some really good people and good ideas that could've potentially come to market," recalled a former top Microsoft executive talking on the condition of anonymity. "And like IBM before it, Microsoft was very strong through many periods of technology/market evolution -- but things finally caught up."
But that's all for a bar-room debate. We know how the story turned out. An appellate court overturned Jackson's decision and Microsoft was able to get back to business as usual. And that wasn't good enough to stay atop the heap in a new world order.